Britain’s Financial Conduct Authority last week issued a set of rule changes aimed at enhancing transparency and offering greater protection to investors, a move which Moody’s said will raise costs and lower fee income for many managers.

The changes would also likely fuel a shift away from ‘active’ funds, which charge higher fees for picking and choosing where to invest, towards ‘passive’ funds, which charge much lower fees for tracking an underlying index.

“Active managers that have been experiencing an increase in operating and compliance costs following a number of local and global regulatory initiatives will have to overhaul their cost structures and product line-up or merge to offset the pressure on revenue and generate economies of scale,” Moody’s said.